Alternative Solutions Needed


Revenue Cycle Management—current challenges in traditional practice paradigms

By Susan Nowell, PT, DPT

Proper bottom-line management is the lifeblood of any successful business.

Revenue cycle management (RCM) is essentially the workflow involved to ensure payment for services provided. One revenue cycle begins with initial patient/client intake and ends with collection of payment for services. In short, it’s the lifecycle from patient to payment. While simple in definition, the process of revenue cycle management is quite complex. At any given moment for a private practice physical therapy business, there will be multiple revenue lifecycles in action at different phases. This multiplicity poses challenges for private practitioners and can create unnecessary retroactive workload and loss of revenue when not managed correctly.

In the past 20 years, we’ve seen health care changes and reimbursement restraints that have made revenue cycle management more complex and challenging. The shift from cost-based to prospective payment systems with the Balanced Budget Act has been accompanied by increasing claim denials in third-party payer systems. In addition, Medicare and other health maintenance organizations (HMOs) are increasing contracts with auditing agencies, so claim audits are also on the rise for private practitioners, often leading to payment denials.


Historically, hospitals and private clinics have lacked adequate information systems for tracking documentation and billing to allow financial managers to efficiently identify and resolve revenue-integrity problems. In turn, handling claim denials has typically involved retroactive analysis of errors, demanding digs through medical record archives, and submission of potentially copious documents in support of an appeal. Handling denials has become so commonplace that Medicare itself publishes guidelines on the appeals process:

Traditional private practice paradigms rely primarily on the revenue from third-party reimbursement. For this business model, the RCM process tends to fall into four main phases: (1) patient demographic intake, scheduling, and insurance verification and authorization, (2) clinical documentation and pre-billing audit, (3) billing and payment posting, and (4) accounts receivable (A/R) management. Errors in any of these phases, in the form of inaccurate or missing data, can lead to denials, having a very negative impact on overall revenue. According to Hodges (2016), the root causes of denials include: inadequate information technology (IT) systems for tracking errors, changes in billing and coding regulations, and inadequate staff training on new systems or changes. While the current push for streamlined, automated health care software and increased patient transparency is very positive, it requires proper user understanding and usage. A small error in an automated system may still travel through the revenue lifecycle unnoticed, creating more retroactive work or subsequent revenue loss. Since multiple staff members are usually involved in the entire revenue cycle, there is greater room for human error, even when part of the process is automated.

For each one of the four revenue cycle phases in a traditional paradigm, certain strategies have become widely used to avoid downstream payment delays. Let’s review!

1. Patient intake demographics and insurance verification and authorization:

  • Doublecheck the accuracy of patient demographics and insurance information.
  • Determine insurance coverage and patient responsibility; directly communicate this to your patient.
  • Clearly establish the primary payer for your patient if they are covered by more than one insurance agency.
  • If your patient is uninsured, discuss payment options and clearly document the agreement, obtain signatures from provider and patient, and include a collections action plan to be taken in the event of patient fiscal noncompliance.

2. Clinical documentation and pre-billing audit:

  • Ensure complete and accurate documentation including functional limitations and measurable progress toward functional goals.
  • Implement peer review among clinical staff to promote greater awareness and a collaborative environment for accurate clinical documentation.
  • For Medicare patients, ensure entry of correct procedural codes, including modifiers and G-codes for functional limitations and quality measures. For more information on functional limitation reporting, see: -PT-OT-SLP-Services-FAQ.pdf.
  • Put into place a system (either manual or automated) of obtaining signed physician orders for initial certification and recertification of care.
  • Create a clinic-based audit system to ensure that all physician order requests have been returned to the clinic with a signature.
  • Preschedule reevaluations to ensure compliance with Medicare guidelines (Medicare requires that reevaluations occur every 30 days or 10 visits, whichever comes first).

3. Billing and payment posting:

  • Educate therapists and billing staff to perform a pre-billing screen to ensure treatment notes accurately reflect services billed.
  • Train billing staff to ensure timely billing and accurate code entry and charge entry.

4. Accounts receivable management:

Your Accounts Receivable is the total balance owed to you for services or products you provide. The accepted turnaround for A/R is 45 days or less in most situations, and the best-performing clinics with a relatively normal payer mix may see it as low as 20 to 30 days.

  • Know your clinic A/R days; to calculate A/R days, divide your total accounts receivable by your average daily revenue. Find the average daily revenue of the three past months by calculating total charges billed in the past three months divided by number of days in those three months. This is your A/R days.
  • Keep track of payers to make sure you are getting paid on time.
  • Collect patient copays at the time of visit when possible.
  • Put in a uniform policy on how to handle delayed patient payments; be upfront with the patient and communicate this at the very first visit.

According to a recent publication in the MicroMarketMonitor, there is a huge unmet demand for new versions of RCM solutions due to consolidation of health care providers and declining reimbursement rates. This is pushing providers to find areas wherein they can increase internal efficiency and automate processes with the aim of reducing expenditure. “Standalone billing and practice management solutions are on the wane in the market today as medical practices move towards integrated, end-to-end systems that unite front and back office data flows, provide seamless access to clinical data from EHRs [electronic health records], and rationalize and streamline the entire RCM process” (2016).

In his recent Impact article “Not a Cup of Coffee: Strategies for Fighting Physical Therapy Commoditization,” Clinicient CEO Rick Jung asserts that despite the Affordable Care Act, there is little correlation between price and quality in our current health care environment. It is critical for therapists to demonstrate greater value through data. One important aspect of this is consolidating clinical and financial data into one system. This consolidation will allow us to rapidly analyze metrics across large population groups, develop evidence-based therapy guidelines, and better manage care for patients with chronic conditions—“The technology is out there to help therapists understand and communicate the clinical effectiveness and financial efficiency they provide.” Electronic health record companies continue to evolve as needs for integrated RCM processes increase. These companies can utilize integrated billing, A/R services, and customizable account management solutions. In addition, the platforms are starting to add pathways for increased patient transparency and access to clinical and financial data. The trend toward integrated RCM processing systems is growing, and we will likely see more technological advances in this arena.

It is clear that as our industry continues to evolve and health care changes continue to be implemented, technology and practice paradigms will evolve as well. Staying on top of the changes and analyzing the effectiveness of your current systems will support your practice in staying on top of RCM in the ever-changing world of health care.


Hodges J. Effective claims denial management enhances revenue: claims denial management has become a critical component of a hospital’s strategic effort to offset the adverse impact of Balanced Budget Act payment reductions. Healthcare Financial Management. Aug. 2002: 40+. Academic OneFile. Web. June 21, 2016.

Jung R. Not a cup of coffee: strategies for fighting physical therapy commoditization. Impact. May 2016.

MicroMarketMonitor. North America revenue cycle management (RCM) market, by product (Integrated RCM, Standalone RCM), by component, by deployment (on premise, web based, cloud-based), by end-user (hospitals, physicians, labs, others), by function (front office, middle office, back office)—forecast to 2021.April 2016.

Susan Nowell, PT, DPT, is a PPS member and founder of Endurellect PT in San Francisco. She is licensed as a physical therapist in Italy and works as an onsite PT for international endurance running events. She may be reached at

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